Spending on Corporate Training Soars: Employee Capabilities Now A Priority

The economic recovery is clearly here: spending on corporate training is soaring.

We just completed our 2014 Corporate Learning Factbook and the research is striking: US spending on corporate training grew by 15% last year (the highest growth rate in seven years) to over $70 Billion in the US and over $130 Billion worldwide. (Download executive summary here.)

This tremendous increase follows two years of accelerated spending in this area (10% in 2011 and 12% in 2012), illustrating how companies see tremendous skills gaps as we recover from the recession.

Corporate training is always a very good indicator of economic activity: when companies slow down they often cut training spending, and then as business grows they ramp back up to train new hires, sales people, and leaders. This is among the most discretionary of all corporate spending areas, so it is an excellent bellweather for business confidence.

Why the rapid growth? All our research tells us that organizations today suffer from a "skills supply chain" challenge. Not only do more than 70% of organizations cite "capability gaps" as one of their top five challenges, but many companies also tell us that it takes 3-5 years to take a seasoned professional and make them fully productive.

And the skills challenge is huge. Recent research shows, for example, that the Oil and Gas industry needs 60,000 petrochemical engineers by 2016 yet only 1300 graduate from US schools each year. This means that oil companies have to train, retrain, and jointly educate a lot of energy engineers to grow.

A few key facts about L&D spending:

Spending on leadership development remains very high. As in prior years the research shows that the #1 areas of spending is management and leadership (35%). All our research on corporate talent shows that global leadership gaps continue to be the most pressing issues on the minds of business and HR leaders. As Millennials take on more responsibility, companies need to build leadership skills at all levels and in all geographies around the world. (Read more at: Millennials Will Soon Rule the World.)

High-performing companies spend more. Companies which fall into our "high-impact" categories spend significantly more on training than average. So companies who invest in a total L&D strategy spend more per employee than those who are inconsistent. This shows that L&D spending pays off.

Technology is revolutionizing this market. The research shows an explosive growth in technology tools to train people today. Self-authored video, online communication channels, virtual learning, and MOOCs (Coursera, Udacity, Udemy, edX, ...) are all growing rapidly as training tools. People still need formal classroom education, but this is now less than half the total "hours" people consume in training around the world. And among the highly advanced companies, as much as 18% of all training is now delivered through mobile devices.

We see significant growth in new virtual learning environments: companies like GE, Motorola,
Philips, and others are extending their training budget to reach 2-3 times the audience through the use of easy to use training portals and virtual learning experiences. While most big companies still have a lot of work rationalizing their training spend, the adoption of technology in training has accelerated.

The Learning Management Systems market is also growing rapidly. We estimate that the market for learning management systems is now over $2 billion and continues to be one of the fastest segments of HR software. Every major HR technology vendor is investing in its LMS offerings.

MOOCs are also likely to radically impact corporate training, as branded universities put more and more courses online. (read The MOOC Marketplace Takes Off for more information.)

This is exciting news. While skills gaps (we call it the "supply chain of skills") continue to challenge companies, an increased investment in training is good for everyone: employees, businesses, and job seekers. This level of increase shows that businesses are aggressively expanding and companies need skilled workers to grow.

Despite a tightening labor market for skills, this data predicts a good year ahead.

I am an industry analyst and researcher focused on corporate human resources, leadership, HR technology, and the intersection between work and life.

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